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Wednesday, October 26, 2016

Government to bring ailing units under PSU bank management

RAISING some hope for the ailing PSUs, Finance Minister Arun Jaitley has begun discussions on a proposal by which sick/ailing units in the steel, power and shipping sectors could be brought under the management of select PSUs. “The agenda for the meeting was whether we can involve management teams of certain successful PSUs to operate certain ailing units of... companies in these sectors (steel, power, and shipping),” Jaitley told reporters following the meeting.
Following this, the finance ministry asked PSUs such as NTPC, Steel Authority of India and Cochin Shipyard to examine taking over some stressed projects in their respective sectors, in coordination with the lender banks.
The stressed assets (gross NPA and restructured loans) of PSU banks rose from Rs 7.46 lakh crore (14.62 per cent of gross advances) as on March 2016 to Rs 7.83 lakh crore (15.74 per cent) as on June 2016. Bulk of the stressed loans are in the infrastructure sectors such as power, steel and shipping
“Public sector banks are to convert a part of the debt held by them in these companies into equity, following which the management teams of select PSUs will manage some of the units,” he added. He also said that this was not to be considered a government takeover or nationalisation of the companies. The minister held a meeting with Financial Services Secretary Anjuly Chib Duggal, Economic Affairs Secretary Shaktikanta Das, and officials from the PMO, chairpersons of SBI, ICICI Bank, Dena Bank, and Indian Bank, representatives from the Ministries of Steel, Power, and Shipping, and the chairpersons of NTPC, SAIL and Cochin Shipyard, to discuss the issue. “There has been a lot done already with regard to the NPA situations in these sectors, and the issue for the meeting was with regard to what further can be done regarding certain defaulters,” the minister said. The steel sector, one of the highest contributors to bank NPAs, had outstanding loans of about Rs.3 lakh crore as of August 2016.
NTPC chairman Gurdeep Singh, Cochin Shipyard chairman Madhu S Nair and SAIL chairman PK Singh took part in the meeting. The banking industry was represented by Indian Banks’ Association chairman Rajeev Rishi (chairman of Central Bank), SBI chairman Arundhati Bhattacharya and ICICI Bank managing director Chanda Kochhar.
Cash-rich PSUs taking over stressed projects, however, will involve complex negotiations on how much cut banks are willing to take and how to deal with the accumulated liabilities of such firms.